U.K. construction sector logged a sustained reduction in business activity in August, but the pace of decrease was only marginal, survey data from Markit showed Friday.
The Chartered Institute of Procurement & Supply/Markit Purchasing Managers' Index for construction activity rose more-than-expected to 49.2 in August from July's 85-month low of 45.9. Economists had expected a score of 46.3.
The latest reading signaled the slowest pace of contraction since the downturn began in June. A reading below 50 indicates contraction in the sector.
"The latest survey indicates only a partial move towards stabilization, rather than a return to business as usual across the construction sector," Tim Moore, a senior economist at Markit, said.
The move towards stabilization chimes with the more upbeat UK manufacturing PMI data for August, and provides hope that the near-term fallout from the 'Brexit' uncertainty will prove less severe than feared, said Moore.
IHS Global Insight economist Howard Archer said there is the suspicion that the July set of purchasing managers' surveys overstated the economy's weakness in the immediate aftermath of the 'Brexit' vote and that the August surveys are overstating the bounce back.
The outlook for the construction activity still looks difficult, given likely ongoing caution of many clients to commit to major projects particularly in the commercial real estate sector, he added.
Among sub sectors, housing and commercial buildings showed slower reductions than seen in July. At the same time, civil engineering activity stabilized.
New order volumes also moved closer to stabilization. Incoming new work decreased at the slowest pace since May. There was a marginal expansion in staffing level in August.
Construction firms also cut back on their purchasing activity in August, extending the current period of decline to three months.
Input price inflation reached its highest level since July 2011 due to depreciation of the currency exchange rate. Looking ahead, construction firms pointed to a rebound in business confidence from July's 39-month low.
by RTT Staff Writer
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